?Uninor?s strategy is focused on the mass market and providing affordable services?
The past year has been a challenging one for the telecom sector. Besides the prevailing regulatory and policy uncertainty, operators were faced with heavy debts, falling ARPUs and thin margins. Despite the adverse market conditions, Uninor continued to focus on the mass market and managed to break even in two of its circles. The operator also won back licences in six circles. In an interview with tele.net, Yogesh Malik, chief operating officer, Uninor, talks about the company?s focus areas and the challenges before it.
Excerpts?
How has Uninor performed over the past year? What were the key milestones achieved by the company?
The past year was an eventful one for Uninor. Despite the prevailing market uncertainties, the company managed to hold its ground and perform well.
Uninor achieved three key milestones during 2012 while maintaining its focus on enhancing its market share and customer base. First, it was able to secure licences in some of the major circles and win back licences in six circles.
Second, it introduced a new business model in the telecom space. Traditionally, in the global and the Indian telecom markets, companies operate on the assumption that once an entity achieves scale of operations, its efficiency increases manyfold. Further, it is believed that substantial funds are required to ensure quality of operations and services.
In this context, we launched a model highlighting that a company does not need to obtain sufficient scale for achieving operational efficiency. An entity can be an efficient operator and develop scale as its operations grow. The model also ensures quality of operations and services at a minimum cost and has worked well for us as we have managed to break even in the Uttar Pradesh (East) and Gujarat circles. Both circles presented different issues for us. The Uttar Pradesh (East) circle has very low ARPUs and high energy costs. In contrast, the Gujarat circle entails high ARPUs and low energy costs.
The third milestone for the company over the past year was achieving scale of operations in the circles it is present in. Uninor has managed to secure new business positions in these circles and ranks fifth in terms of overall market share.
What are the current focus areas for the company?
Two factors are clearly visible in the Indian telecom space today. Despite the long-term presence of several operators, profit margins of all companies (especially mid-tier ones) have been declining steadily. This is a major concern as it has severe ramifications for providing services to end-consumers.
Besides, the penetration of telecom services in the country has not reached optimum levels. While service penetration levels in the metros are comparable to other mature markets globally, telecom services have not managed to make an impact in mid-urban, developing and rural areas. This implies that operators have not been able to market telecom services as a tool for empowering rural customers. Keeping this in mind, the company?s strategy is focused on the mass market and providing affordable telecom services, which needs to be realised in a profitable manner.
A unique feature of the mass market is that it is not segmented only by purchasing capacity or demography. There are various sub-segments like SMS, basic services and high speed data services. At this stage, we are targeting the mass market segment for basic services. The company will work on evolving its service portfolio in tandem with the dynamic nature of the telecom market. The licences we hold are liberalised and thus the company can offer services based on any technology to its customers.
What are the key challenges faced by Uninor in India? What steps has the company taken to address these?
The Indian telecom market is highly competitive and, therefore, the challenge before us is to maintain a disciplined and focused approach, and deliver on our promises. This is important as, in a crowded market such as this, the quality of service delivered to users is a decisive factor in attracting and retaining customers. Hence, the company has to constantly drive itself in the right direction depending on the environment.
There are several other issues in the existing telecom ecosystem. For instance, traditionally there is a wall between operators and their business partners. However, our method of collaborating with our business partners differs widely from that of other operators. We believe in inviting our partners into the boardroom to work with us, which helps in leveraging the potential of both parties. So far, we have managed quite satisfactorily and have improved our service delivery and drive efficiency at a low scale compared to the incumbents. We have also been able to reduce costs and break even faster.
The company managed to win back some of its spectrum during the November 2012 auctions. What is its growth strategy for these circles?
Our target customer base (the mass market) is our main area of focus. To leverage this segment to the fullest, we believe in offering our customers reasonably priced products. In this regard, the company has adopted the ?sabse sasta? brand position across its circles. We do not want our customers to be overwhelmed with the number of choices available in the market today. Instead, we are focusing on pushing the quality of our products and services. For instance, if customers have an established usage pattern, we centre our products and services on the same to provide the best service quality.
The competitive landscape of the sector has undergone a significant change over the past one year. How will the emerging landscape impact your strategies?
Over the past year, there have been several changes aimed at getting the telecom sector back on track. This is clearly visible in terms of recent developments pertaining to regulation, policy, liberalised spectrum and 3G roaming. Given that we are a long-term player and are focusing on remaining profitable, we are making efforts to accommodate these changes. From the regulatory point of view, telecom companies ought to attempt to adopt the best practices from other Asian and European countries.
What are your expectations with regard to regulatory and market developments as well as the company?s growth and profitability in the coming years?
Over the past year, several key developments have taken place on the regulatory front. A discussion between various industry stakeholders is essential to encourage these changes.
The industry still has significant potential as only the voice segment has saturated. High speed data services are expected to usher in the next wave of growth. Data services must be approached in a practical manner, only then will they be a viable proposition. However, we do not see data at par with voice in terms of growth and customer uptake. To cite an example, 3G did not take off in the expected manner owing to high tariffs and patchy coverage.
Network interconnect is another segment that has not been leveraged to the fullest. The manner in which interconnect is being addressed in the Indian telecom space has to be improved significantly. The idea is to remove artificial barriers in telecom networks in order to improve voice quality and eliminate call drops.
In a nutshell, Uninor aims at being profitable not only in terms of earnings before interest, taxes, depreciation and amortisation or expenses but also in terms of cash flow. We wish to reach the third or fourth position in the circles where we are offering services.
